The recession may have seen the nation’s top firms still raking it in even with falling revenues but small firms are suffering on all fronts. If reduced work flow wasn’t bad enough, an increase in the threat of negligence claims has led to a corresponding increase in insurance premiums.

Thousands of Britain’s high street solicitors are facing crippling increases to the cost of their professional indemnity insurance because of the threat of negligence cases arising from the recession. Chaos is predicted in the run up to the October 1st renewal deadline.

The increases to annual insurance premiums of about 20 per cent (and even higher in some cases), have led to a cashflow squeeze at many small law firms that are already suffering from a sharp fall in revenue and greatly reduced access to short-term finance. On top of this, the last few years have seen insurers getting increasingly nervous and the number willing to provide PII for solos over the past five years has decreased dramatically.

The only alternative is the assigned risks pool, which charges a whopping 27.5% of fees on the first £500,000.

Insurance giant XL may be their knight in shining armour having recently entered the PII market for small firms. The Law Society is also trying to play its part by offering an insurance buying guide .

Small law firms threatened by soaring insurance costs [The Times]
Can sole practitioners avoid getting a raw deal on PII premiums? [The Gazette]